Summaries of health policy coverage from major news organizations

KAISER PERMANENTE: CALIFORNIA COURT ALLEGES UNFAIR PRACTICE

"In a major blow" to Kaiser Permanente, the "California Supreme Court ruled Monday that there is substantial evidence that Kaiser Permanente committed fraud and deliberately delayed arbitrating the case of a patient dying of lung cancer to save hundreds of thousands of dollars" (La Ganga, Los Angeles Times, 7/1). "In a victory for consumers, the California Supreme Court ruled yesterday that companies can be sued if they fail to live up to their promise of fast and fair arbitration," San Francisco Chronicle reports. Justice Stanley Mosk wrote, "There is evidence that Kaiser established a self-administered arbitration system in which delay for its own benefit and convenience was an inherent part" (Chiang, 7/1). In a concurring opinion, Justice Joyce Kennard "said that it takes almost two years on average for a Kaiser member to set an arbitration date, compared with the two months that the HMO claims in promotional literature" (Wall Street Journal, 7/1). HARD TIMES Kaiser officials contend "that the decision -- which sends a malpractice case brought by the lung cancer patient's family back to a lower court -- actually upholds the value of arbitration and will allow the lower court to decide whether there was fraud in the case." Tom Debly, Northern California spokesperson for Kaiser, said, "We believe the facts when they're presented would show that we didn't do anything to intentionally delay arbitration in this case." Times reports that the decision "comes at a difficult time for Kaiser, which is facing increasing criticism nationwide that patients are being harmed by its efforts to cut costs." Most notably, in April, "authorities in Texas threatened to shut down the HMO's operations there" (see AHL 4/18) (7/1). BIG CONSEQUENCES Consumer advocates said that the ruling "could have a broad impact on HMOs, insurance companies, banks and other businesses that rely upon out-of-court arbitration to resolve disputes and save the high costs of going to trial" (Chronicle, 7/1). Times reports that the decision also "could affect millions of Californians relying on HMOs for medical care, [and] may raise the basic standards for all arbitration in California" (7/1).

THE CASE The ruling was issued in the case of a Hayward, CA, family who claimed that Kaiser "deliberately delayed its arbitration of a medical malpractice claim until after the patient died." Wilfredo Engalla "complained that Kaiser misdiagnosed his lung cancer for five years." By the time the cancer was discovered, it "had become inoperable." Chronicle reports that Engalla and his family requested arbitration on their malpractice claim against Kaiser in May 1991. Under the arbitration agreement, a neutral arbitrator should have been provided within 60 days. However, Engalla said that Kaiser "delayed and stalled for months in agreeing to an arbitrator." Both Engalla and his wife sought $250,000 in damages; however, when Engalla died in October 1991, only his wife's claim was left pending. The family then withdrew from arbitration and filed suit in Alameda County Superior Court, where a judge ruled in favor of the family. But a state appeals court overturned that decision. COURT FINDINGS The court noted yesterday that "there are delays in 99% of Kaiser medical malpractice arbitrations." According to statistics, instead of the 60 days allotted for selecting an arbitrator, "it takes almost two years for a neutral arbitrator to be picked" and it takes two and a half years "to reach a hearing in a Kaiser arbitration," Chronicle reports. In addition, the court said that Kaiser "failed to inform members that it designed and administers the arbitration program." Judge Mosk said that "there is strong evidence that Kaiser fraudulently misrepresented its arbitration process to members and at the very least failed to act in good faith in living up to its promises" (7/1).

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